Estimate Time5 min

Be a great money role model

Key takeaways

  • Anything that involves money, and the exchange of value, can be used as a learning tool.
  • Don't shield children, cost can be used as a teaching opportunity.
  • Teach children and teens the difference between wants and needs.

Kids are always watching their parents, even during unexpected times—it's their job.

It's important for parents to be the best role models possible by teaching their kids the values and life skills needed to live happy-healthy lives.

Here are some tips to avoid common mistakes with kids around money.

Talking to your kids about money

Explore more stories that can help facilitate money conversations with your children and teens.

Mistake 1. Believing your kids must have the same things as other kids

Many parents talk themselves into believing their children should have the same things as their friends or peers.

A solution : Ask yourself: Why am I considering buying this for my children? Will it help them do better in school? Will it help them develop their skills? Do they understand the cost? There's nothing wrong with having nice things, but when children get things without realizing the amount of money they cost, and the work required to earn them—there's a value disconnect that can start a cycle of wanting and getting, without ever being satisfied.

Mistake 2. Shielding your children from cost

One of the ideas that parents may want to reconsider is the notion of shielding your children from the harsh realities of money.

A solution : Anything that involves money and the exchange of value, can be used as a learning tool. Try not to make money conversations a big secret in the family. There's no way to expect kids to grow up with a healthy attitude toward money unless they know how it works.

For example, when the bill comes at a restaurant, show it to your kids and explain how to check the math against the items on the ticket. Even discuss what the tax is and how it's calculated. You could also explain how to compute a tip. Talk about the economics of being a waiter or waitress, and how the tip is a significant part of servers income.

Shielding your children from the cost of things can keep them from getting a good start managing their money.

Mistake 3. Using credit cards thoughtlessly

Credit cards could pose a financial danger to teenagers, specifically  especially for those who may not understand the relationship between using credit card and paying it off.

When used responsibly, a credit card is an essential and valuable financial tool that can be instrumental in establishing credit history, and more. However, when used irresponsibly or inappropriately, it could perpetuate the thought that credit cards are magic cards or invisible money. It could also could lead to overspending and high-interest debt, if not paid off in full each month. This could continue into adulthood, creating poor financial health.

A solution : You could consider giving kids allowances (cash in hand) so they'll make the connection that money is tangible. You can teach them the difference between wants and needs, and incorporate them into a budget so they can see how money is exchanged for items.

Mistake 4. Spending money on your children without thinking

Do your children constantly ask for money? Are you constantly handing out cash for miscellaneous wants or asks?

A solution : It may be time to discuss the real financial facts of life with your child. You can decide what you think they should earn by doing chores in the home, or work outside of the house, and how this will be budgeted. Explain that you are not a bank, and make sure that they understand the rules.

Mistake 5. Intervening when kids are earning and saving for a want

Remember when you were a kid and worked hard to save money for something you really wanted? You were probably proud of your accomplishment. Imagine instead that your parents swooped in to pay for it, undoing the sense of empowerment and independence you felt.

A solution : If your child is earning money and saving to get a special item, instead of intervening and buying it for them, encourage them to reach their goal and celebrate their success.

Mistake 6. Outdoing an ex

It's hard when there's a divorce and one of the parents feels they can "buy" their kid's love. It's not easy to say "No" to your child only to find that your decision was undermined.

A solution : If possible, have healthy conversations with your ex to ensure you're both in agreement with how to be the best money role models. Stick to your house rules.

Be a money role model

No matter how many times we utter the phrase "do as I say, not as I do," your kids and teens are going to pick up your habits and behaviors, especially with matters of money. If you've realize you made a mistake—and you don't want your kids to do the same—take accountability. Correct it. Remember your kids and teens are watching your every step, and you have the power to help them develop smart habits from the start.

Help your teen learn about money

The Fidelity Youth® Account gives teens the power to save and invest their money.

More to explore

The views expressed are as of the date indicated and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author, as applicable, and not necessarily those of Fidelity Investments. The third-party contributors are not employed by Fidelity but are compensated for their services.

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